Binding Authority and Endorsements

    Posted by MAIA on May 13, 2019 12:01:00 AM


    This question was answered based upon current rules, regulations & statutes in effect on April 11, 2019

    We have a client who recently bought an additional car. Their son had an injury and is disabled. The additional car was bought for their son’s friend who is using the car to help drive the son around and run errands. He has 6 points, all speeding violations. The company is blocking the endorsement to add him as a driver all together due to the activity on his license. I know that the company prefers drivers with no accidents or violations, but can they block an endorsement midterm in Massachusetts?



    Kathy Cormier:  My first thought is NO...if you have an active valid policy you must process changes.  The company can set them up for non-renew if they don’t want this new driver.

    I’m sending this to Irene Morrill, VP Technical Affairs to see what she thinks...Irene?

    Irene Morrill:  I agree with Kathy …not TAKING the policy in the first place …but once you have it you are STUCK …unless this is taking place within the first 90 days of policy inception date in which case they can LEGALLY CANCEL the policy …otherwise as Kathy said they set it up for non-renewal.

    Though, I don’t know what the agency contract states for “binding” authority.  I’m sending this to Dan Foley, Esq., Legal Counsel MAIA … Dan ..if the agent/company contract states that they can’t bind such vehicles would that allow them to “just send the endorsement back” instead of legal cancellation and/or non-renewal?

     Dan Foley:  If the agency’s contract provides for “immediate binding authority” then the company can’t block the endorsement to add the driver.  However, if the agency does not have binding authority and must get approval from the company before coverage becomes effective, then the company may block the endorsement.  But, based on the agency’s  email, the policy was already in effect so, in my opinion, the company would have to issue either a cancellation or non-renewal notice, depending upon when this took place, either within the first 90 days or after.

    This document is not a legal opinion and should not be relied upon as such. The intent of this document is to provide a general background regarding the topic or topics discussed, not to provide legal advice. Producers and agencies should consult an attorney regarding specific situations and specific questions with respect to the topic or topics covered in this document. Neither the Massachusetts Association of Insurance Agents, Number One Insurance Agency nor any of its employees shall be responsible for any errors or omissions regarding any statements made in this document, nor any errors or omissions regarding any statutes, regulations, court rules, and/or any other government documents cited in this document.

    Topics: Personal, 2019

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